The cash market rose on average about a nickel overall Tuesday as a late-session futures surge Monday combined with supportive weather in some parts of the country to send quotes squarely into the plus column. Futures built on Monday's gains and the July contract Tuesday rose 3.1 cents to $2.446 and August futures added 2.9 cents to $2.496. July crude oil tacked on 31 cents to $84.29/bbl.
Great Lakes marketers admitted that Monday's and Tuesday's advances had left them a little flat-footed. "We haven't been buying anything the last couple of days because we are seeing the prices not really cooperating," said a Michigan marketer. "Going forward, prices could improve, and we don't have that much more to buy. For June we bought 75% at index."
Next-day prices at Great Lakes and Upper Midwest points advanced. Quotes on Michcon and Consumers were each up about a nickel. Alliance and Northern Natural Gas Ventura parcels each added a couple of pennies more.
Temperature forecasts for the region showed increasing warmth as the week wears on. AccuWeather.com predicted that the high in Chicago Tuesday of 73 would rise to 76 Wednesday, 79 Thursday and 84 by Friday. The normal high this time of year in Chicago is 76.
Northern California prices advanced about a nickel, but adjoining market points saw lesser gains. "It's a little cooler than it has been for the last little bit, so the heating load at night is perhaps driving prices a little bit," said a California marketer.
Quotes at PG&E Citygate were higher by a nickel, but quotes at Malin and Opal were up only a couple of pennies apiece.
At SoCal Citygate gas for Wednesday delivery added just shy of a nickel while SoCal Border and El Paso S. Mainline were each up a few cents.
According to AccuWeather.com, the overnight low Tuesday in San Francisco is expected to drop to 48, five degrees below normal, before rising to 51 Wednesday and 52 Thursday.
Midcontinent as well as points in South and East Texas gained as well. Panhandle Eastern and ANR SW were each quoted about 6- to 7-cents higher. Gas into the NGPL Midcontinent Pool rose about a nickel.
At Carthage next-day deliveries were noted over a nickel higher, and gas on Transco Zone 1 Wednesday rose 4 cents. At Katy Wednesday gas added a couple of pennies.
Top analysts see the market stuck in a conundrum of ongoing high inventories and improving demand. "Nearby futures are attempting to lift off with assistance from increasing suggestions of a significant temperature warm-up within the major metropolitan areas of Chicago and New York within the six-15 day time window," said Jim Ritterbusch of Ritterbusch and Associates. "But we will continue to advise that deviations from normal don't appear sufficient to induce a sustainable upside price response, at least one capable of carrying July futures to above the $2.50 level.
"Such a development will likely require a bullish surprise out of Thursday's storage report. Although a cut in the supply surplus against five-year averages of as much as 40-45 Bcf is possible, such a contraction has likely been discounted, and an injection of less than 40 Bcf or so may be required to jump-start another significant price advance."
Tim Evans of Citi Futures Perspective forecasts a build of 45 Bcf for the week ended June 1.
Analysts may see a rangebound market, but the latest data from the Commodity Futures Trading Commission (CFTC) shows directional traders can't enter long positions fast enough nor exit short positions fast enough either. For the week ended May 29 it its Commitments of Traders Report the CFTC showed long futures and options at the IntercontinentalExchange (2,500 MMBtu per contract) rose by 94,285 to 854,368 and short futures and options increased by 27,659 to 186,884. At the New York Mercantile Exchange long futures and options (10,000 MMBtu per contract) fell by 8,220 to 191,359 and short holdings decreased by 10,453 to 249,021. When adjusted for contract size long futures and options increased by 15,351 and short holdings fell by 3,538.
Technical analysts see futures as rangebound and any trading opportunities taking time to develop. "As long as natgas is stuck between $2.693 resistance and $2.029 support, the bigger picture trend will be murky at best," said Brian LaRose, a market technician at United-ICAP. "Clear $2.693 and we will be looking for a larger degree ABC up from $1.902. Sink below $2.029 and we will be looking for a continuation of a five-wave move down from $4.983. Near-term natgas is free to float around in this neutral zone, so we suggest patience."
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